Lei Hang, Dandan Liu, Fusheng Xie

A Hybrid Model Using PCA and BP Neural Network for Time Series Prediction in Chinese Stock Market with TOPSIS Analysis

  • Computer Science Applications
  • Software
Save to CiteDrive Show PDF

The stock price changes rapidly and is highly nonlinear in the financial market. One of the common concerns of many scholars and investors is how to accurately predict the stock price and the trend of rising and falling in a short time. Machine learning and deep learning techniques have found their place in financial institutions thanks to the ability of time series data prediction with high precision. However, the prediction accuracy of these models is still far from satisfactory. Most existing studies use original, single prediction algorithms that cannot overcome inherent limitations. This study proposes a hybrid model using principal component analysis (PCA) and backpropagation (BP) neural networks. The historical records of China Merchants Bank are used for data collection from 2015 to 2021. PCA preprocesses the original data to reduce the dimensionality and is then adopted by the BP neural network to predict the stock closing price of China Merchants Bank. We compare and analyze the PCA–BP model with three training algorithms, and the results indicate that the Bayesian regularization algorithm performs best. Besides, we perform the stock prediction using a traditional exponential smoothing approach. The experiment results show that the predicted stock closing price is close to the actual value, and the mean absolute percentage error can reach 0.0130, which is more significant than the traditional approach. Furthermore, A TOPSIS approach is utilized to evaluate the robustness of the proposed model. Finally, we demonstrate the usability of the designed hybrid model by predicting the stock price of another selected stock.

Need a simple solution for managing your BibTeX entries? Explore CiteDrive!

  • Web-based, modern reference management
  • Collaborate and share with fellow researchers
  • Integration with Overleaf
  • Comprehensive BibTeX/BibLaTeX support
  • Save articles and websites directly from your browser
  • Search for new articles from a database of tens of millions of references
Try out CiteDrive

More from our Archive